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THE  COMMERCIAL'  PARADOX/  ' 

T~  \ l ^ u o 

A PAPER  DISCUSSING  CERTAIN  IMPORTANT  PROBLEMS  IN  TRANS- 
PORTATION READ  BEFORE  THE  MANUFACTURERS’ 

CLUB,  OF  PHILADELPHIA,  AT  THE  CLUB 
' MEETING,  FEBRUARY  I3TH,  1 888. 

By  Professor  Lewis  M.  Haupt,  C.  E., 

Of  the  University  of  Pennsylvania. 

In  1882  the  manufactured  products  of  this  great  city  were 
estimated  to  be  worth  $481,226,309,  employing  242,483  persons, 
and  comprising  over  12,000  establishments.  To-day  the  aggre- 
gate is  even  greater.  It  is,  therefore,  a question  of  no  small 
magnitude  to  find  a market  for  this  large  output  at  such  a price 
as  to  leave  a margin  of  profit  for  the  manufacturer  as  well  as 
for  the  transporter  and  broker. 

In  considering  the  methods  by  which  this  very,  desirable 
result  may  be  obtained,  it  will  become  necessary  to  analyze 
rather  minutely  the  various  elements  which  make  up  the  market 
price  of  an  article,  and  to  determine  how  they  may  be  modified 
so  as  to  increase  the  profits,  as  well  as  to  extend  the  sales. 

The  market  price  is  composed  of  two  principal  elements,, 
viz. : cost  of  production  and  cost  of  delivery.  The  former  in- 
cludes the  cost  and  transportation  of  raw  materials,  cost  of 
handling,  import  duties,  insurance,  interest  on  plant,  deprecia- 
tion, wages  and  contingencies.  The  latter,  cost  of  transporta- 
tion, terminal  charges,  insurance,  storage,  porterage,  commissions, 
and  other  items.  From  this  statement  it  will  be  sefen  that  the 
expense  incident  to  transportation  may  form  a large  percentage 
of  the  commercial  value.  If  the  raw  material,  whether  it  be 
ores,  cereals,  fuels,  textiles  or  other  substances,  be  carried  any 
considerable  distance  to  the  mills  or  factories,  the  cost  of  trans- 
portation will  enter  as  a factor  in  both  directions  in  the  cost  of 
the  product.  Hence  it  is  that  the  selection  of  the  site  for  the 

1 Reprinted  from  The  M anufacturer  of  March,  1888.  Vol.  1,  No.  4,  Philadelphia. 


19335 

p 


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H s- 


plant  forms  so.iipjDortant  ^an  element  in  the  success  of  a large 
establishment,  ^n^jt'Tf  djie  to  the  proximity  of  fuel  and 

ores  that  Philadelphia  ’ oweS*  fts*  great  development  in  manufac- 
turing industjfie^  •*:*  : \ • 

For  a given  *glarft*^ithvfixe’d*  ra<es  of  wages  and  good  man- 
agement, there*  *isj  jSut?\li{i}3*  V 6oJn  for  increased  economy  in  the 
cost  of  manufactur'd,  Whereas  The  rates  charged  for  transpor- 
tation are  often  very  variable  and  are  readily  affected  by  a large 
number  of  influences.  It  is  manifest  that  for  a stated  market 
price,  whatever  reduces  the  cost  of  delivery  should  increase  the 
margin  of  profit  or  extend  the  range  of  the  market  for  any 
article.  It  is  with  reference,  therefore,  to  the  relation  of  cost 
of  transportation  to  that  of  manufacture  and  the  best  methods 
of  increasing  the  range  of  the  market  that  I desire  to  direct 
your  attention  this  evening. 

First,  let  us  consider  the  case  of  the  raw  material.  If  it 
can  be  delivered  to  our  factories  from  over  the  sea  (having  been 
carried  as  ballast  for  a nominal  rate),  at  a less  price  than  the 
same  quantity  of  domestic  product  will  bring,  then  one  class  of 
economists  will  say,  buy  from  the  foreign  markets,  and  give  us 
a cheaper  product,  whilst  the  other  class  will  require  that  a tariff 
be  assessed  which  will  debar  the  foreign  and  enable  the  home 
product  to  be  worked  to  advantage.  I do  not  propose  to  discuss 
the  merits  of  this  important  question,  but  will  merely  state 
that  if  the  American  must  compete  with  the  European  labor, 
the  first  effect  will  be  manifested  in  a reduction  of  his  wages, 
and  consequently  in  his  purchasing  capacity  that  the  equilibrium 
may  be  maintained  ; and  the  subsequent  effect  may  be  no  wages 
at  all.  Moreover,  the  great  range  in  latitude  and  altitude  of 
this  Republic  is  such  as  to  yield  almost  every  variety  of  crude 
product  desired,  whether  animal,  vegetable  or  mineral.  The 
vital  questions,  therefore,  of  reducing  the  cost  of  the  neces- 
saries of  life  and  of  retaining  the  margin  of  profit  on  manufac- 
tures without  affecting  wages,  appears  to  me  to  resolve  itself 
into  a consideration  of  the  methods  for  cheapening  the  cost  of 
transportation  and  delivery,  or  else,  where  possible,  of  so  chang- 
ing the  form  and  value  of  the  product  as  to  enable  it  to  bear  a 
higher  rate  or  a longer  haul  to  the  market  or  the  mill. 

For  example,  will  it  pay  the  farmer  best  to  ship  his  products 
in  the  form  of  grain  and  hay  ; or  to  concentrate  them  into  live 


3 


stock  or  dressed  meats,  or  to  convert  them  into  fleece  or  dairy 
products  ? The  answer  to  the  query  is  a local  one,  and  involves 
too  many  uncertain  elements  to  permit  of  a discussion  at  this 
time. 

To  illustrate  the  general  principles  upon  which  the  solution 
•of  the  transportation  problem  depends,  I submit  a few  commer- 
cial maxims  for  your  consideration. 

The  first  is  : That  the  reduction  of  the  rates  of  transporta- 
tion increases  the  circle  of  patronage , or  market  range. 

The  second  proposition  is  : That  low  rates  create  traffic. 

The  third  : That  competition  p7'oduces  low  rates , and  hence 
creates  traffic. 

The  fourth  : That  increased  facilities  create  traffic. 

The  fifth  : That  transportation  by  zvater  is  cheaper  than  by 

rail. 

The  sixth  : That  the  improvement  of  the  water-ways  is  bene- 
ficial to  the  railway , and  the  consequence  is  that  the  water-ways 
are  the  best  possible  competitors  and  regulators  of  rates,  and 
their  improvements  isbeneficial  not  only  to  the  railroads,  but  to 
every  individual  requiring  food,  clothing,  shelter  and  other  neces- 
saries, as  well  as  the  luxuries  of  life. 

Some  of  these  maxims  are  almost  axioms,  yet  to  impress 
their  meaning  and  importance  more  forcibly,  I have  collated  a 
few  statistics  to  verify  them  more  fully. 

Thus  with  reference  to  the  first  proposition,  let  us  see  how 
far  an  article  may  be  carried  by  the  various  means  of  transpor- 
tation before  its  market  value  is  entirely  absorbed  by  the  cost  of 
movement.  This  distance  I will  call  the  market  range.  For 
this  purpose  I take  the  values  in  1874,  as  given  in  the  Windom 
Report  on  “Transportation  Routes  to  the  Seaboard,”1  for  a ton 
of  wheat  quoted  at  $49.50 2 and  with  rates  by  canal  at  one-half 
cent  per  ton  per  mile ; railway,  one  and  one-half  cent  ; and  com- 
mon roads,  fifteen  cents.  “ The  table  does  not  purport  to  show 
how  far  grain  may  be  carried  by  river  or  lake,  but  unquestion- 
ably that  distance  is  not  less  than  twice  the  distance  it  can  be 
carried  by  canal.”  This  statement  is  confirmed  by  the  latest 
report  of  statistician  J.  R.  Dodge,  as  to  the  relative  rates  from 
Chicago  to  Buffalo  via  lake,  and  thence  to  New  York  via  canal,3 

1 Appendix,  page  127,  letter  from  Breese  J.  Stevens,  March  2d,  1874. 

2 $1.50  per  bushel. 

* Page  613,  Report,  Number  46,  Department  of  Agriculture,  November,  1887, 


4 


so  that  the  comparative  lake  or  river  rate  would  be  one-quarter 
cent  per  ton  per  mile.  Dividing  the  market  value  by  these  rates 
there  result  the  following  radii  for  the  circle  of  distribution. 

Radii 

Cts.  miles.  Tributary  areas. 

For  carriage  by  common  road  15  330  341,946  square  miles. 

“ “ “ railway  @ 1.5  3300  34,194,600  “ 

“ “ “ canal  @ 0.5  9900  307,751,400  “ 

“ “ “ river  @ 0.25  19800  1,231,005,600 

In  other  words,  if  the  cost  of  movement  by  river  be  taken 
as  the  unit,  the  relative  rates  in  1874  were  as 

River.  Canal.  R.  R.  C.  R 
1 : 2 : 6 : 60 

the  distance  carried,  as 

River.  Canal.  R.  R.  C.  R. 

60  : 30  : 10  : 1 

and  the  areas  affected,  as  the  squares  of  these  distances,  or  as 

River.  Canal.  R.  R.  C.  R. 

3600  : 900  : 100  : 1 

At  these  relative  fates,  therefore,  and  under  the  given  con- 
ditions, water  carriage,  by  river  or  lake  as  affecting  areas,  is 
theoretically  36  times  more  beneficial  than  by  rail,  and  3,600 
times  more  than  by  wagon.  It  is  hardly  necessary  to  add  that 
these  theoretical  limits  can  only  be  roughly  approached  in  prac- 
tice, and  that  practically  the  other  items  of  cost  consume  a large 
percentage  of  the  market  value.  Thus,  if  it  costs  50  cents  per 
bushel,  or  $16.50  per  ton  to  produce  wheat,  the  radii  of  the  above 
circles  of  distribution  would  each  be  reduced  33  per  cent.  So 
the  other  fixed  charges  would  still  further  contract  the  range ; 
which  will  depend  chiefly  upon  the  margin  between  cost  of  pro- 
duction and  market  price.  Each  article  will  have  its  particular 
range,  depending  upon  its  character  and  utility,  but  all  will  be 
correspondingly  affected  by  the  relative  rates  of  transportation. 
The  market  range,  however,  is  found  to  be  extended  by  a reduc- 
tion of  rate , which  is  the  first  point  to  be  established. 

2.  That  low  I'ates  create  traffic  will  be  accepted  as  a fact 
without  proof.  This  law  was  fully  appreciated  by  your  worthy 
secretary  in  his  able  argument  against  reduction  of  duties  by 
enlargement  of  the  free  list.  He  says  “that  mere  reduction  of 
duties,  unless  that  reduction  be  carried  almost  to  the  zero  point, 


5 


will  assuredly  increase  the  revenues  from  customs  rather  than  re- 
duce them.  The  certain  effect  of  such  reduction  will  be  to  en- 
large importations  in  almost  every  case,  with  the  result  that  the 
desired  deficiency  will  be  more  than  made  good.  This  is  a fact 
so  well  known  and  so  generally  admitted  that  no  argument  in 
support  of  it  need  be  presented.”  Yet  the  evidence  may  be  so 
clearly  and  briefly  stated,  and  is  so  conclusive,  that  I trust  I 
may  be  excused  for  introducing  a few  illustrations  in  the  form  of 
diagrams.1  The  first  will  show  graphically  (a)  the  rates  from 
Chicago  to  New  York  by  “all  rail,”  by  lake  and  rail,  and  by  lake 
and  canal  in  1870  and  1871  ; and  (b)  the  volume  of  the  shipments 
of  a single  article  (wheat)  during  the  same  time.  Although  the 
water  route  is  longer,  it  takes  the  volume  of  traffic  because  it  is 
cheaper.  It  is  merely  a question  of  rates.  This  diagram  (a) 
also  confirms  the  first  proposition. 

The  converse  of  this  proposition,  than  an  increase  of  traffic 
reduces  rates , is  not  necessarily  true,  for  the  rule  with  transpor- 
tation companies  used  to  be  to  charge  “ what  the  traffic  will 
bear,”  and  unless  there  was  competition  no  amount  of  argument 
would  prevail  in  lowering  the  schedule.  Strange  as  it  may  seem, 
rates  which  were  practically  prohibitory  were  frequently  main- 
tained when  a lower  rate  would  have  put  in  motion  a larger 
amount  of  traffic,  which  could  have  been  profitably  handled. 
The  business  maxim  of  “small  profits  and  quick  sales,”  or  lower 
rates  and  larger  volume,  is  the  best  for  transportation  companies 
as  well  as  for  the  general  public  ; but  it  is  a difficult  problem  to 
determine  to  what  extent  it  should  be  carried.  Yet  every  mer- 
chant and  manufacturer  is  trying  to  solve  it  in  such  a way  as  to 
give  a maximum  of  profit  on  his  aggregate  sales. 

The  third  aphorism,  that  competition  creates  traffic , is  so  uni- 
versally accepted  that  manufacturing  and  business  centres  have 
become  almost  synonymous  with  railroad  centres,  but  when  it  is 
remembered  that  “where  combination  is  possible,  competition 
is  impossible,”  it  will  be  seen  that  the  benefits  to  be  derived 
from  railroad  competition  may  be  extinguished  by  pooling,  pur- 
chase, or  otherwise.  Combination  is  more  difficult  when  the 
ways  of  communication  are  of  such  a character  that  they  cannot 
be  bought,  and  are  free  to  anyone  desiring  to  traverse  them. 


1 The  diagrams  are  omitted  from  this  published  statement,  as  being  unnecessary  to  a 
full  comprehension  of  the  subject. 


6 


This  condition  is  found  to  exist  most  nearly  when  waterways  are 
brought  into  competition  with  railways,  as  is  seen  in  New 
York,  Chicago,  St.  Louis,  and  other  places.  Philadelphia  can- 
not be  considered  a competitive  point  in  this  sense  since  she  has 
no  direct  water  communication  with  the  great  west.  Pittsburg 
might  be  included,  if  the  Ohio  River  were  made  navigable  at  all 
stages  during  the  season. 

Commissioner. Fink  says  that  “the  Erie  Canal  influences 
the  rates  of  transportation  from  Chicago,  St.  Louis,  Cincinnati, 
etc.,  to  the  interior  of  the  Gulf  States,  and  all  the  rail  rates  are 
kept  in  check  by  water  transportation.”  It  is  this  water  compe- 
tition that  has  built  up  the  metropolitan  cities  at  the  terminal 
points  of  the  lake  and  canal  systems.  Astonishing  as  it  may 
seem  to  one  not  familiar  with  the  magnitude  of  our  domestic 
commerce,  it  is  stated,  as  a fact,  that  the  entrances  and  clear- 
ances at  the  port  of  Chicago,  and  the  tonnage  as  well,  exceed 
that  of  New  York  and  Philadelphia  combined,  and  are  more  than 
four  times  as  great  as  that  of  the  latter  place.  The  vessel  ton- 
nage of  the  lakes  exceed  that  of  our  entire  coastwise  marine.1 

The  memorial  of  the  Philadelphia  Board  of  Trade  to  the 
last  Congress,  recites  “ That  the  rates  on  through  traffic  are 
largely  fixed  over  the  entire  country  by  the  competition  of  water 
routes,  and  as  the  railroads,  in  order  to  get  any  portion  of  the 
through  traffic  are  compelled  to  approximate  their  rates  to  those 
charged  by  the  water  routes,  they  are  necessarily  obliged  to 
accept  on  this  through  traffic  a compensation  but  little  in  excess 
of  the  cost  of  carrying  the  same.  That,  in  the  judgment  of  your 
memorialists,  no  injury  results  from  this  course  on  the  part  of 
the  railroad  company  ; but  on  the  contrary,  it  not  only  furnishes 
cheap  flour  and  other  provisions  to  the  laboring  classes  of  our 
country,  but  also  enables  an  enormous  volume  of  provisions, 
cereals,  and  other  staples  to  reach  the  seaboard,  and  thence 
by  ocean  transportation  the  markets  of  other  countries,  and 
there  meet  on  favorable  terms  the  products  of  other  parts  of  the 
world,  thus  placing  the  balance  of  trade  in  favor  of  the  United 
States,  and  making  it  a creditor  of  other  nations  rather  than 
debtor.” 

The  effect  of  water  competition  is  also  shown  by  the  fact 
that  the  rail  rates  to  the  east  of  Chicago  are  less  than  those  to 


i 


1 Total  entrances  and  clearances  for  1886,  22,372  vessels;  tonnage,  7,877,080. 

1 


I 

I 


7 


the  west  thereof,  but  I need  not  multiply  the  evidence  in  sup- 
port of  a proposition  so  universally  accepted.  It  is  thought  by 
many  that  the  delivery  by  rail  is  more  rapid  and  certain  than 
that  by  water.  On  this  point  the  Windom  Report  states.1  “ It 
is  also  true  practically,  however  it  may  be  theoretically,  that  the 
rate  (velocity)  of  movement  by  rail  is  but  little,  if  any,  greater 
than  by  water.”2 

Fourth,  that  increased  facilities  beget  traffic  was  formerly  re- 
garded as  a fallacy ; but  so  convincing  are  the  facts  that  the 
reading  and  observant  public  are  becoming  converts.  As  a rule, 
mere  arguments  are  of  little  avail  in  changing  public  sentiment 
unless  supported  by  an  exhibit  of  actual  results.  The  most  con- 
vincing proofs  of  this  proposition  are  to  be  found  in  the  intra- 
mural travel  of  large  cities  as  affected  by  increasing  the  capacity 
for  traffic. 

Thus,  in  London  the  omnibus  traffic  was  increased  by  the 
addition  of  the  underground  metropolitan  system  ; both  of  these 
were  benefited  by  the  establishment  of  the  district  railway.  The 
traffic  of  these  three  was  still  further  augmented  by  the  addition 
of  the  tramways,  and  the  rate  of  increase  is  greater  on  each  sys- 
tem to-day  than  it  was  on  any  one  before  the  existence  of  the 
others.  The  same  conditions  obtain  in  reference  to  the  passen- 
ger traffic  in  New  York.  The  greater  the  velocity  and  capacity 
of  the  lines  be  made,  the  larger  is  the  volume  of  business,  and 
the  more  rapidly  the  cities’  growth. 

The  fifth  proposition , that  transportation  by  water  is  cheaper 
than  by  rail , may  be  readily  established  by  reference  to  the 
scheduled  rates  ? between  two  points  connected  by  rail  and  by 
water.  Thus,  between  Chicago  and  New  York  the  rates  in  1887 
were,  for  grain  (wheat),  via  Lake  Shore  and  Michigan  Southern 
Railway,  981  miles,  25  cents  per  hundredweight,  or  15  cents  per 
bushel ; $5.00  per  ton,  or  .509  cents  per  ton  per  mile. 

By  lake  to  Buffalo,  1000  miles,  4.7  cents,  or  1.567  mills  per 
ton  per  mile. 

By  canal  to  New  York,  504  miles,  4.6  cents,  or  3.04  mills 
per  ton  per  mile. 

1 In  1884  the  through  rates,  by  lake,  from  Chicago  to  Buffalo  were  two  and  two-tenths 
cents,  and  from  Buffalo  to  New  York,  via  Erie  Canal,  five  cents. 

2 Page  126,  Appendix. 

3 See  Report  of  Department  of  Agriculture,  No.  46,  November,  1887 ; Rates  for  October. 


8 


By  lake  and  canal  to  New  York,  1504  miles,  9.3  cents,  or 
2.00  mills  per  ton  per  mile. 

Rates  via  Chicago  and  Atlantic  Railroad,  986  miles,  are  the 
same  as  those  via  Lake  Shore  and  Michigan  Southern  Railway, 
whilst  those  by  water  are  5.7  cents  per  bushel  less,  yet  the  dis- 
tance is  over  50  per  cent,  greater. 

By  ocean  to  England,  3080  miles,  7.0  cents,  or  0.77  mills  per 
ton  per  mile. 

Taking  the  ocean  rate  as  the  unit,  the  relative  rates  are  as 
follows : By  ocean,  1 ; by  lake,  2 ; by  canal,  4,  and  by  railroads, 
6.7  ; or  comparing  the  present  rates  with  those  previously  given 
in  1874,  there  results : Ocean,  ; lake  or  river,  1 ; canal  2,  and 
railroad,  3^.  Thus,  while  the  actual  rates  by  river  and  canal 
have  each  fallen  40  per  cent.,  the  railroad  rates  have  been  re- 
duced about  56^  per  cent.,  all  of  which  reductions  are  due  to 
the  increased  capacity  and  improvements  brought  about  by  com- 
petition, and  the  large  volume  of  traffic  developed  by  the  rapid 
growth  of  facilities  for  inter-communication. 

This  brings  us  to  our  last  proposition,  which  is  the  commer- 
cial paradox,  namely,  that  the  improvement  of  the  waterways  is 
beneficial  to  the  railways.  I say  it  is  paradoxical,  since  I believe 
the  impression  to  be  general  that  whatever  freight  or  passenger 
traffic  is  carried  by  water  is  just  that  much  abstracted  from  the  rail- 
ways (when  they  exist  in  competition),  and  not  only  is  there  a 
reduction  in  the  volume  but  also  in  the  rate  of  tariff,  so  that  the 
railroad  must  suffer  in  consequence.  Certainly  this  is  a natural 
deduction,  and  that  it  is  a prevalent  one  is  shown  by  the  open 
opposition  made  by  the  railroad  interests  to  the  general  improve- 
ment of  our  navigable  rivers,  whenever  such  proposed  improve- 
ments parallel  the  railroad  lines. 

I have  made  an  analysis  of  the  testimony  relating  to  this 
point  taken  before  the  Cullom  Committee,  and  find  that  of  ninety- 
one  persons,  73,  or  80  per  cent,  were  in  favor,  15,  or  17  per  cent, 
were  opposed,  and  3 per  cent,  undecided.  Of  the  fifteen  opposed, 
ten  were  railroad  officials,  three  farmers,  one  merchant,  and  one 
a machinist.  Eight  railroad  commissioners  were  in  favor  of  im- 
proving the  waterways. 

If  the  impression  is  fallacious,  it  must  be  in  consequence  of 
the  existence  of  other  elements  not  generally  recognized,  yet 
which  are  potent  factors  in  determining  the  result.  And  what 


9 


are  they  ? They  are  the  chain  of  propositions  which  we  have 
already  briefly  considered,  whereby  the  railroads  are  benefited  ; 
for  the  revenue  of  a railroad  is  dependent  above  all  things  upon 
population,  and  population  is  a function  of  cheap,  certain,  and 
uniform  rates  of  transportation,  as  well  as  cheap  power  for  manu- 
factures. These  in  turn  are  assured  by  competition,  and  there 
is  no  competition  so  reliable  as  that  furnished  by  navigable 
waters.  Hence  it  is  that  the  more  rapidly  the  streams  are  im- 
proved, the  more  dense  will  the  population  become  and  the 
greater  the  volume  of  business  not  only  for  the  river,  but  also 
for  the  railroad. 

Concerning  this  point,  Mr.  Stevens  wrote  to  the  Windom 
Committee  on  Transportation  Routes  d “ The  creative  power 
of  water  transportation  is  not  restricted  to  the  increase  of  exist- 
ing values,  but  extends  to  the  creation  of  values  where  otherwise 
none  would  exist.  Certain  articles  of  commerce,  such  as  stone, 
brick,  gravel,  firewood,  earth,  etc.,  become  articles  of  commerce 
almost  exclusively  from  this  operation.  It  is  by  some  asserted 
that  its  benefits  in  the  creation  of  new  values  are  greater  and  in 
every  way  more  important  than  its  benefits  in  the  enhancement 
of  existing  values.” 

This  proposition  is  further  confirmed  by  Col.  William  P. 
Craighill,  in  his  report  to  the  Chief  of  Engineers  for  1885,  on 
the  improvement  of  the  Great  Kanawha,  wherein  he  says  : “As 
the  improvement  of  the  river  (Great  Kanawha)  has  progressed, 
the  commerce  on  it,  notably  the  shipment  of  coal,  has  greatly 
increased.  This  has  not  been  to  the  disadvantage  of  the  Chesa- 
peake and  Ohio  Railroad,  as  some  supposed  would  be  the  case, 
for  the  statistics  show  an  increase  in  the  coal  business  of  that 
highway  of  trade  and  travel.1 2 

Certainly,  if  the  existence  of  a navigable  channel  be  inju- 
rious to  a line  of  railways,  I know  of  no  better  practical  instance 
to  prove  it  than  that  of  the  New  York  Central  and  Hudson 
River. 

Here  we  find  a grand  navigable  river,  linked  to  a magnifi- 
cent chain  of  inland  seas  by  a canal  having  a capacity  of 
16,000,000  tons,  and  paralleled  by  a trunk  line  of  railroad  of  less 
length  than  the  canal  and  river.  There  is  also  a shorter  line  of 


1 Appendix,  page  127. 

2P.  1846,  Rep.  of  C.  of  Eng.,  1885,  Vol.  III. 


10 


all-rail  communication  which  is  not  parallel  to  a water  route 
between  the  termini,  hence  if  the  water  line  is  not  beneficial  but 
injurious,  the  New  York  Central  should  suffer  in  comparison 
with  its  competitor,  the  New  York,  Lake  Erie  and  Western. 

Please  note  the  facts  : The  distance  from  Buffalo  to  New 
York,  via  the  Central,  is  441^  miles;  via  Erie  Canal  it  is  502 
miles,  or  60  miles  further,  and  by  the  Erie  Railroad  it  is  423 
miles,  or  18^  less  ; therefore,  the  latter  should  have  the  advan- 
tage, at  least  in  through  traffic. 

The  Erie  Canal  was  opened  in  1825,  and  enlarged  in  1862 
from  a capacity  of  5 to  16  millions  of  tons,  the  boats  being  in- 
creased from  76  to  240  tons. 

The  New  York  Central  Railroad  was  organized  August, 
1853,  by  the  consolidation  of  nine  links,  the  first  of  which  (the 
Albany  and  Schenectady),  was  opened  September  12th,  1831. 
Nearly  all  of  these  lines  were  parallel  to  the  canal,  and  may  be 
said  to  have  been  created  by  the  business  developed  by  it.  The 
Hudson  River  Railroad  was  opened  October  3d,  1851,  as  an  out- 
let to  the  other  system.  The  Erie  was  opened  to  Dunkirk, 
April  22d,  1851,  so  that  the  two  roads  may  be  said  to  be  of  the 
same  age.  Let  us  now  compare  their  balance  sheets  for  1886, 
and  examine  the  results  : 


New  York  Central  and  Hudson  River  Railroad. 


Passenger. 

Freight. 

f 

Total. 

Percentage 

of 

operating 

expenses. 

Gross  earnings 

Gross  expenses 

$10,341,850.12 

5,700,678.23 

$17,699,785.47 

11,753,281.98 

$28,041,636.59 

17,453,900.21 

62 

Net  receipts 

$4,641,171.89 

$5,946,50349 

$10,587,676  38 

New  York , Lake  Erie  and  Western  Railroad. 


Gross  earnings 

$4,193,820.85 

$14,116,674.30  | 

$18,310,495 15 

66 

Gross  expenses 

2,969,786.39 

9,040,286  41  ! 

12, 010, 072. 80 

Net  receipts 

$1,224,034.46 

$5,076,387.89  J 

$6,300,422.35 

This  exhibit  shows  conclusively  that  the  balance  is  in  favor 
of  the  longer  line  bordering  the  water  route,  by  nearly  68  per 


I 


cent.  Doubtless  most  of  this  difference  will  be  found  to  result 
from  the  local  passenger  traffic  due  to  greater  density  of  popu- 
lation. Referring  to  the  report  of  the  Railroad  Commissioners 
for  1886,  I find  these  statements  : 


New  York  Central  and  Hudson  River  Traffic  and  Mileage 

Statistics. 


Through. 

Local. 

Total. 

Per  Cent, 
of  Local 
Total. 

Passengers  carried 

619,278 

127, 547,623 
8,665,852 
1,900,550,963 

14,042,840 

348,581,106 

3,870,583 

196,909,070 

14,662,118 

476,128,729 

12,636,435 

2,397,460,023 

96 

73 

36 

21 

“ one  mile 

Tons  of  freight 

“ “ carried  one  mile . . 

Thus  it  appears  that  96  per  cent.,  or  nearly  all  of  the  pas- 
senger business,  is  local.  Of  the  total  passenger  mileage  73  per 
cent.,  and  of  the  freight  mileage  but  21  per  cent.,  are  local. 

As  the  freight  business  is  relatively  small,  it  might  be  sup- 
posed that  it  is  taken  by  the  canal  or  the  shorter  railroad  line, 
but  a glance  at  the  freight  column  shows  that  the  Central  still 
carries  much  more  through  freight  than  either  the  Erie  Canal 
or  Railroad. 

The  statement  for  the  New  York,  Lake  Erie  and  Western 
River  Railroad  gives  : 


Erie. 


Through. 

Local. 

Total. 

Per  Cent. 

Passengers  carried 

507,987 

5,753,I3I 

6,261,118 

92 

“ “ one  mile 

49,914,259 

133,290,200 

183,204,462 

75 

Tons  of  freight 

3,162,876 

9,644,042 

12,806,918 

75 

“ carried  one  mile .. . 

912,898,126 

1,145,495,896 

2,058,394,022 

57 

New  York  Canals. 

Tons  of  freight  (1886) 


5,293,982 


The  local  freight  of  the  Erie  is  about  three  times  the 
through  tonnage.  This  is  because  62%  per  cent,  of  the  total 
tonnage  is  coal  and  coke;  flour  and  grain  being  but  9.21  per 


cent.,  and  manufactures  and  merchandise  only  5.34  per  cent. ; 
whilst  on  the  Central  only  23  per  cent,  is  coal  and^coke ; 20  per 
cent,  is  flour  and  grain,  and  28  percent,  manufactures  and  mer- 
chandise. 

Thus  it  will  be  seen  that  the  Erie  business  is  derived  largely 
from  its  adjacent  mining  territory,  and  that  it  can  scarcely  be 
considered  a competitor  even  for  the  through  traffic  from  the 
lakes,  although  it  taps  them  at  two  points,  Dunkirk  and  Buffalo, 
while  the  Central,  notwithstanding  the  free  canal  and  its  own 
great  length  of  line,  is  far  more  profitable  than  its  rival. 

Other  instances  might  be  cited  in  support  of  this  sixth 
proposition,  but  I believe  these  will  be  sufficient,  and  time  con- 
strains me  to  sum  up  the  consequences . 

If  the  foregoing  propositions  be  accepted  as  true,  it  must 
follow  that  the  “general  welfare”  of  this  country  would  be  pro- 
moted by  opening  up  our  much-neglected  natural  highways  of 
trade,  and  so  make  such  an  investment  of  our  natural  surplus  as 
would  return  to  the  people  a manifold  interest  on  their  taxes. 

In  my  opinion  spending  public  money  in  constructing  per- 
manent fortifications  is  equivalent  to  burying  it  in  a sinking 
fund,  from  which  it  can  never  be  recovered,  as  such  defenses 
would  be  useless  against  modern  methods  of  attack.  We  need 
speed  and  mobility  in  our  batteries,  or  if  they  must  be  on  land 
and  stationary,  then  sand  or  earth  are  better  than  stone. 

Money  spent  on  public  buildings  is  used  for  the  convenience 
of  the  public  service,  and  may  or  may  not  be  an  economical  in- 
vestment. It  gives  temporary  employment,  however,  to  a 
limited  class  of  artisans  ; but  money  spent  in  the  improvement 
of  our  rivers  and  harbors  is  an  investment  which  stimulates 
every  possible  kind  of  industry,  lowers  the  rates  of  transporta- 
tion, extends  the  range  of  the  market,  increases  the  purchasing 
power  of  wages,  lowers  the  price  of  food  and  other  products,  re- 
duces rates  of  insurance,  prevents  disasters  from  floods,  reclaims 
valuable  property  from  inundations,  and,  confers  many  other 
benefits  upon  the  country  at  large.  Need  there  be  any  question, 
therefore,  as  to  how  it  is  best  to  dispose  of  a portion  of  the  sur- 
plus ? 

That  these  conclusions  are  not  mere  generalities,  I will  sub- 
mit only  a brief  statistical  statement  showing  a comparative 


13 


exhibit  of  the  market  range  of  wheat  and  the  relative  benefits  con- 
ferred by  the  various  ways  of  communication  at  present  rates. 


Based  upon  October  Prices  from  Chicago  to  Liverpool,  1 877. 


Rate  per 
Ton,  per 
Mile. 

Theoretical 
Market  Range 
at  33  Vi  per 
Ton,  or  $i  per 
Bushel. 

Relative 

Distances. 

Relative 

Tributary 

Areas. 

Relative 

Benefits. 

Cents. 

Miles. 

Railroad 

.508 

6,666 

3 

9 

1 

Canal 

•304 

11, hi 

5 

25 

2.8 

Lake  or  River 

• 157 

22,222 

10 

100 

11. 1 

Lake  and  Canal 

.200 

16,666 

Ocean 

.077 

43,290 

20 

400 

44-4 

From  this  table  it  appears  that  at  canal  rates  the  area  bene- 
fited would  be  2.8  times  that  at  rail  rates ; at  lake  or  river  rates 
it  would  be  1 1 times,  and  at  ocean  rates  44  times  greater,  show- 
ing the  superiority  of  movement  in  bulk  with  a minimum  of 
fixed  expenses  and  low  ratio  of  terminal  charges. 

It  has  been  proved  by  careful  experiment  on  the  Elbe  that 
as  the  tonnage  is  doubled  from  150  to  300  tons  the  cost  of  ton- 
nage is  lowered  from  .55  to  .44  of  a cent  per  ton,  or  about  20  per 
cent.,  and  a further  increase  in  bulk  still  further  reduced  the 
cost. 

On  the  English  waterways,  which  are  chiefly  artificial,  the 
actual  cost  of  movement  is  0.50  cents  per  ton  per  mile,  and  the 
terminal  charges  are  0.25  cents. 

The  tendency,  therefore,  is  towards  larger  vessels  in  the  in- 
terest of  economy  ; but  this  is  limited  by  the  amount  of  water 
available  over  the  bars  at  the  harbor  entrances  and  in  our  navi- 
gable rivers. 

It  may  not  be  generally  known  that  there  are  not  more  than 
six  or  seven1  alluvial  harbors  on  the  Atlantic  and  Gulf  coasts 
where  the  depths  over  the  bar  exceed  sixteen  feet,  and  there  are 
many  of  our  so-called  navigable  rivers  where  the  depth  in  sum- 
mer may  not  exceed  two  feet.  The  draught  of  the  largest  ocean 
steamer  is  twenty-six  feet  and  over : and  it  is  no  common  occur- 
rence for  them  to  have  to  wait  for  the  tide  to  cross  even  the 
New  York  bar. 

1 New  York,  Philadelphia,  Norfolk,  Port  Royal,  the  mouth  of  the  Savannah  River 
and  New  Orleans. 


The  possibilities  of  our  development  in  this  direction  can 
only  be  realized  by  looking  at  the  figures  giving  the  extent  of 
the  coast  line  of  the  United  States. 

A calculation  by  the  coast  survey  in  1853,  gives  the  total 
shore  line  of  the  United  States  (including  bays  and  inlets  and 
the  great  lakes,  and  excluding  Alaska)  at  25,476  miles.  In  the 
river  system  there  are  in  the  Atlantic  and  Gulf  States  to  the 
head  of  tide  water,  11,711  miles;  in  the  central  basin,  35,644 
miles,  and  in  the  Pacific  coast,  1710  miles,  making  a total  shore 
line  of  rivers  in  the  United  States  of  49,065  miles.1 

We  may  say,  therefore,  that  in  round  numbers  we  have 

25.000  miles  of  coast  line,  50,000  miles  of  river  shore  line,  and 

160.000  miles  of  railroad,  but  that  of  the  first  two  items  a very 
small  percentage  is  available  for  commerce,  and  yet  at  current 
prices  the  rate  charged  for  one  mile  of  railroad  would  transport 
the  same  load  six  and  two-thirds  miles  on  the  ocean,  or  three  and 
one-third  by  river. 

Although  my  time  has  about  expired,  I feel  constrained, 
with  your  indulgence,  to  carry  this  argument  to  its  logical  con- 
clusion. 

If  it  be  asked  wfyy  the  waterways  are  in  this  deplorable  con- 
dition, I would  reply  that  it  is  because  they  are  under  the  juris- 
diction of  various  authorities  having  no  direct  interest  in  their 
improvement.  The  United  States,  as  a whole,  has  none ; the 
States  by  themselves  have  none,  and  the  riparian  owners  are  not 
concerned  beyond  their  own  requirements,  which  are  generally 
local.  It  is  only  by  the  concerted  action  of  influential  bodies  of 
citizens  bringing  a pressure  to  bear  upon  the  representatives  of 
their  district,  that  an  appropriation  can  be  obtained ; first,  for 
the  survey,  and  then  for  the  work,  if  found  necessary.  Thus,  in 
the  absence  of  any  well-organized  department  for  conducting 
these  important  civil  works  of  the  government,  such  as  exists  in 
all  the  prominent  European  countries,  much  time  and  energy  is 
wasted  in  efforts  to  secure  an  appropriation  for  an  important, 
and  it  may  be,  urgent  improvement,  and  these  concessions  are 
frequently  only  obtained  by  an  extended  distribution  of  patron- 
age. Again,  when  the  River  and  Harbor  Bill  fails,  as  it  has 
done  at  the  closing  session  of  the  last  three  Congresses,  opera- 
tions must  be  suspended,  the  plant  depreciates,  the  civil  corps  is 


1 Page 33,  Report  of  the  Commissioner  of  Navigation,  Washington,  D.  C.,  1886. 


5 


almost  disbanded,  and  the  works  themselves  are  frequently 
washed  away  from  the  lack  of  funds  for  completion. 

Certainly  this  is  not  an  economical  method  ol  administration. 
Without  detaining  you  to  listen  to  a review  of  the  numerous  de- 
fects in  the  present  methods  of  administering  these  works,  I 
may  indicate  their  characteristics  by  stating  that  the  remedies 
desired  lie  in  the  direction  of  permanency  of  residence  for  the 
officers  in  charge,  individual  responsibility  for  results,  adequacy, 
and  certainty  of  appropriations,  and  a system  of  promotions 
based  upon  relative  ability  and  not  upon  military  succession. 

These  results  can  readily  be  secured  by  dividing  the  coun- 
try into  topographical  basins,  and  assigning  to  each  a chief  engi- 
neer, whose  term  of  office  should  be  for  life,  subject  to  removal 
only  for  incompetency  or  misdemeanor.  In  this  way  only  can 
a thorough  knowledge  of  the  physical,  mechanical,  commercial, 
social,  legal,  and  administrative  elements  be  intimately  united  in 
an  efficient,  local,  executive  officer. 

By  some  such  plan  there  would  be  a possibility  of  expedition 
and  effective  work  being  done  upon  our  navigable  rivers.  With- 
out it  “ it  may  be  for  years  ” before  radical  improvements  are 
effected. 

Let  us  apply  the  methods  of  the  present  regime  to  the  re- 
quirements of  this  port. 

We  are  hemmed  in  on  every  side,  and  out  of  thirty-eight 
miles  of  water  frontage  (counting  both  banks  of  the  Schuylkill) 
there  are  only  (omitting  the  Schuylkill)  six  miles,  or  about  15 
per  cent,  available.  As  this  is  an  exceedingly  important  matter 
for  the  interests  of  Philadelphia,  it  will  bear  a moment’s  investi- 
gation : Beginning  on  the  Delaware,  at  the  lower  limits  of  the 
city,  the  four  miles  reaching  to  Hog  Island  are  cut  off  by  the 
Maiden  Island  dike,  just  completed  to  create  a channel  over  the 
Mifflin  bar.  Most  of  the  next  three  miles  reaching  to  the 
Schuylkill  belong  to  the  government  reservation  at  Fort  Mifflin 
(where  a solitary  sargeant  “ Holds  the  Fort  ”)  which  is  of  no 
possible  use  to  the  government,  unless  it  be  for  storage  of  worn- 
out  material ; and  of  no  service  to  the  city  as  a means  of  defense, 
being  entirely  too  close.  The  next  three  and  a half  miles  are 
occupied  by  League  Island  and  the  Horseshoe  shoals,  thus  mak- 
ing about  ten  miles  which  are  entirely  occupied  by  the  govern- 
ment, without  benefit  to  it,  and  greatly  to  the  disadvantage  of 


i6 


this  port.  In  the  next  six  miles,  from  Greenwich  to  Richmond,, 
are  to  be  found  the  limited  commercial  facilities  which  it  is  so 
desirable  to  extend. 

And  here  the  deep  water  navigation  is  terminated  by  the 
Five-Mile  Bar,  which  cuts  off  the  remaining  eight  miles  of  deep 
water  to  the  city  limits  on  the  Poquessing. 

Manifestly  a portion  of  the  reservations  should  be  relin- 
quished to  the  city,  and  the  bars  be  reduced  to  a sufficient  ex- 
tent to  open  the  upper  river  to  deeper  draft  vessels,  and  to 
improve  the  entrance  to  the  Schuylkill  where  the  bar  requires 
frequent  attention. 

The  worst  obstructions  on  the  river  are  those  within  the 
limits  of  the  port.  With  them  removed  we  should  practically 
have  ocean  rates  of  transportation  to  all  ports  that  can  be 
reached  by  tidal  waters.  The  complaints  of  lack  of  facilities  at 
this  harbor  are  not  due  merely  to  the  contracted  western  chan- 
nel abreast  of  the  islands,  but  to  a neglect  to  appreciate  and 
develop  the  extended  facilities  for  foreign  commerce  which  na- 
ture has  so  abundantly  provided.  The  city  is  now  obstructed 
by  six  tranverse  lines  of  railroads  at  grade,  and  to  load  steamers 
of  the  size  of  those  of  the  Cunard  Line  (470  feet  long,  57.2  beam, 
37.2  depth  of  hold)  having  a net  registered  tonnage  of  over  4000 
tons,  would  require  so  large  a freight  movement  as  to  still 
further  embarrass  ordinary  business  transactions  and  produce 
frequent  blockades  and  casualties.  To  load  every  such  vessel 
would  require  about  250  cars  of  freight,  if  the  cars  were  full.  It 
is  not  difficult  to  conceive  of  the  condition  of  Delaware  Avenue 
if  many  vessels  of  this  size  were  to  attempt  to  discharge  and 
load  along  this  frontage  within  a reasonable  time. 

The  main  obstructions  to  navigation  are  the  shoals  near  the 
limits  of  the  city,  namely,  at  Maiden  Island  and  Five-Mile  Bar, 
and  these  are  the  ones  that  should  be  deepened,  to  open  our 
gates  to  foreign  or  even  domestic  commerce,  to  reduce  the  rates 
of  transportation,  and  to  extend  the  market  range  of  our  pro- 
ducts. 

There  was  a time  when  Philadelphia  had  independent,  inter- 
nal waterways  north,  south,  and  west ; but  these  have  been 
gradually  absorbed  and  controlled  by  competing  interests  so  that 
to-day  the  only  open  door  for  navigation  is  that  by  the  river,  via 
the  capes.  It  has  been  proposed  to  reduce  this  distance  by  the 


; 


construction  of  a canal  to  the  Atlantic  Ocean  near  Absecom 
Inlet.  Without  stopping  to  discuss  this  project,  I need  only  say 
that  it  would  not  reduce  the  time  of  reaching  the  ocean,  because 
of  the  limited  velocity  at  which  vessels  of  large  size  can  navigate 
such  artificial  channels.  And  there  is  already  a much  shorter 
artificial  waterway  to  the  ocean  via  the  Delaware  and  Raritan 
Canal,  which  should  be  purchased  and  enlarged  by  the  National 
Government  at  very  much  less  expense,  and  made  an  important 
link  in  an  all- water  route  via  the  Erie  Canal,  the  lakes,  the 
Hennepin,  or  other  canal  (when  completed),  and  the  Mississippi 
to  a large  part  of  the  interior  of  our  federal  domain. 

Concerning  the  influence  of  this  canal  on  the  commerce  of 
Philadelphia,  it  was  testified  by  an  eminent  authority  before  the 
Windom  Committee,  that  in  1870  more  tons  passed  through  the 
Delaware  and  Raritan  Canal  than  all  the  foreign  tonnage  to  and 
from  New  York  for  that  year,  and  that  it  aggregated  about 
4,000,000  tons  per  annum.  It  exceeded  by  three  times  the  entire 
tonnage  both  ways  of  the  Suez  Canal. 

The  same  authority  in  his  testimony  before  the  Cullom  In- 
terstate Commerce  Committee,  in  1885,  states  that  this  canal  is 
now  owned  by  the  railroad  company  between  Philadelphia  and 
New  York  ; that  the  tonnage  of  the  canal  has  greatly  diminished  ; 
that  the  Erie  Canal  is  the  only  one  of  any  importance  in  the 
country  not  under  the  control  of  the  railroads,  and  that,  conse- 
quently, there  is  no  use  in  keeping  up  the  canals  at  all  ; that  the 
State  canals  were  all  bought  up  by  the  railroads  between  1858 
and  1875,  and  in  some  instances  tracks  have  been  laid  on  the 
tow  paths,  thus  destroying  their  competition. 

Another  witness  states  that  the  cost  of  improving  the  water 
routes  would  come  back  to  the  people,  many  times  over,  in  the 
reduced  rates  of  freight  which  they  would  secure  even  if  all  the 
freight  went,  as  now,  by  rail,  and  the  canals  were  unused. 

Governor  Seymour  says  that  by  reducing  the  tolls  of  the 
Erie  Canal,  the  balance  of  trade  was  largely  thrown  in  favor  of 
the  United  States,  and  in  summing  up  their  evidence,  the  Cul- 
lom Committee  concludes,  “ That  natural  or  artificial  channels 
of  communication  by  water  when  favorably  located,  adequately 
improved,  and  properly  maintained,  afford  the  cheapest  method 
of  long-distance  transportation  now  known,  and  that  they  must 
continue  to  exercise  in  the  future,  as  they  have  invariably  exer- 


i8 


cised  in  the  past,  an  absolute  controlling  and  beneficially  regu- 
lating influence  upon  the  charges  made  upon  any  and  all  other 
means  of  transit.” 

In  1883  Mr.  Blodgett  wrote  that  the  export  of  manufactured 
products  to  foreign  countries  from  Philadelphia  amounted  to 
about  $25,000,000  annually,  and  that  one-half  of  this  went  by 
way  of  New  York,  in  consequence  of  the  absence  of  shipping 
facilities  from  this  port  direct.  Yet  this  is  a small  part  of  the 
output  of  our  home  manufactories  upon  which  the  freight  rates 
to  the  interior,  as  well  as  to  the  foreign  ports,  might  be  consid- 
erably reduced  if  there  were  greater  competition  by  water. 

To  extend  the  benefits  of  the  Erie  Canal  to  Philadelphia, 
via  the  Delaware  and  Raritan  ; to  open  an  enlarged  and  shorter 
line  to  New  York  by  water;  to  connect  Philadelphia  with  the 
Mississippi  Basin  by  means  of  the  proposed  Hennepin  or  other 
canal ; to  develop  and  improve  the  navigable  waters  of  the 
United  States  ; to  place  our  shipping  interests  upon  an  equality 
with  those  of  other  nations  by  suitable  subsidies,  and  to  open  up 
our  harbor  entrances  to  commerce,  are  matters  which  would 
benefit  not  only  the  manufacturer,  shipper,  farmer,  merchant, 
artisan,  and  constructor,  but  every  individual  living  in  this  Re- 
public, and  they  merit  the  serious  attention  not  only  of  the 
legislator,  but  of  every  public-spirited  and  patriotic  citizen. 

Congress  does  not  take  the  initiative,  but  will  receive  and 
act  upon  the  suggestion  and  recommendation  of  an  intelligent 
constituency.  These,  gentlemen,  are  objects  worthy  of  your 
consideration.  They  will  not  be  attained  without  an  effort,  and 
it  is  for  the  manufacturers  and  business  men  of  Philadelphia  to 
take  the  initiative  if  they  would  secure  results  so  beneficial  to 
themselves  and  the  community.  It  is  not  sufficient  to  think, 
nor  to  talk,  but,  in  the  language  of  our  illustrious  poet,  we  should 

“ Act — act  in  the  living  present, 

Heart  within,  and  God  o’er  head.” 


